Differences emerge between governor, Republicans and Democrats on budget

Sunday

Apr 24, 2011 at 12:01 AMApr 24, 2011 at 11:00 PM

LANSING ? Gov. Rick Snyder would like to complete work on the next state budget by May 31, a significant departure from recent years when budget negotiations have stretched until the Oct. 1 start of the new fiscal year.

Associated Press

LANSING — Gov. Rick Snyder would like to complete work on the next state budget by May 31, a significant departure from recent years when budget negotiations have stretched until the Oct. 1 start of the new fiscal year.

The Republican governor has allies in the GOP-controlled House and Senate. But Republican legislative leaders won't simply rubber stamp the budget plan Snyder presented in February. Differences already have emerged in spending plans for education, prisons, a safety net for the poor and other areas.

Lawmakers say the budget plans are a work in progress and likely to change before the full House and Senate vote on them.

Snyder said last week that the back-and-forth with lawmakers is "part of the process" and that he still hopes to have a budget in place by June. The former computer company executive wants to significantly reduce business taxes and make up some of the lost revenue with higher taxes on individuals, including applying the income tax to some retirement income.

Government leaders also need to erase a projected $1.4 billion shortfall, which means most state departments will have less money to spend next fiscal year than they do now.

A look at some of the key budget plans and areas of difference:

K-12 SCHOOLS

Snyder: Proposes a per-student reduction of $300 in addition to a $170 per-student reduction that already was in place when he took office. The $170 cut was filled with federal money for many districts this year, but the federal funds won't be available for the upcoming school year, leaving districts to absorb a $470-per-student cut. The new reduction would be about a 4 percent cut in the per-student foundation grant for districts on the low end of Michigan's funding system. But throw in the $170 cut and higher payments for pension costs and most districts will have to grapple with budgets that shrink 8 percent to 10 percent. Snyder's cutting $300 a student so he can use the money instead to pay for community colleges and universities out of the school aid fund rather than the general fund.

House: Proposes additional per-student cuts of 3.9 percent, a reduction that would range from $285 to $331 a student, plus the existing $170 reduction. That means the total cuts would range from $455 to $501.

Senate: Proposes additional cuts of $170 a student, plus the current the $170 a student reduction, bringing the total reduction to $340 per student.

Opposition: Democrats argue even the shallowest proposed cuts would send of scores of Michigan school districts to the brink of insolvency next year, causing more layoffs and cuts to programs. They say the cuts are happening only because Republicans want to use money that traditionally has been restricted to K-12 districts to help support community colleges and universities. The nonpartisan Citizens Research Council of Michigan says the effective per-student loss for districts next fiscal year would be $715 once other factors such as increased school contributions to retirement plans are included, based on Snyder's plan.

UNIVERSITIES

Snyder: Proposes cutting state aid to individual universities by at least 15 percent. The cuts would be higher, topping 20 percent in some cases, if universities don't limit tuition increases to roughly 7 percent. Would tap about $700 million in school aid fund dollars for universities, rather than giving the money to K-12 schools.

Senate: Agrees with Snyder on the 15 percent cut in state aid, but eliminates the penalty for universities that raise tuition more than 7 percent. Universities have told senators they don't expect to raise tuition that high next fall. The plan would use significantly less school aid revenue for universities, leaving more money for K-12 schools.

House: Proposes cutting university operations funding by 14 percent across the board with an additional 1 percent cut based on how much state aid each university gets on a per-student basis. Universities receiving a larger amount of state aid per student would face larger reductions. Snyder's tuition restraint plan is in the House proposal, meaning universities with steep tuition increases would see bigger cuts.

Opposition: Democrats worry that continued reductions in state aid could put more pressure on universities to significantly increase tuition, making college too costly for some families. State aid and tuition are the primary revenue sources for the state's 15 public universities. State aid for universities and student financial aid has dropped 25 percent in the past decade, according to the nonpartisan Senate Fiscal Agency.

WELFARE

Snyder: Sets a lifetime limit of four years for residents to receive welfare payments, with exemptions for incapacity and hardship.

Senate and House: Their proposals include versions of the four-year limit on welfare. Their plans would make further reductions in other areas, including cuts to money for children's clothing and other programs. Supporters say some of the limits and cuts would put Michigan more in line with practices in other states.

Opponents: Human service organizations say the proposed cuts are too harsh and would make conditions worse for Michigan's low-income and unemployment residents. They note that Snyder has made reducing the number of children living in poverty one of his priorities, but say that policies such as restricting welfare eligibility and eliminating the state's Earned Income Tax Credit will push more families into poverty.

PRISONS

Snyder: Corrections spending would remain at about $2 billion, although the state's prison population has been declining. The Department of Corrections plans to close the Florence Crane Correctional Facility in Coldwater on June 1. A Muskegon prison also will close since a deal to house Pennsylvania prisoners is coming to an end. The administration hopes to save money by contracting out services such as providing meals and running prison stores and by getting concessions from state workers, a third of whom work in corrections. Supporters say limiting corrections spending could free up cash for other state programs since 23 percent of the general fund now goes to corrections.

—Senate: Proposal reflects higher anticipated savings from prison closings, based on plans that were announced after Snyder's February budget proposal. More savings are anticipated in privatization, consolidation and other changes than in the governor's proposal.

—House: Recommends more cuts by also closing Mound Correctional Facility in Detroit in early 2012.

—Opposition: Prison guards worry about layoffs because of the prison closings, and say stress would increase on guards at other facilities that would get more prisoners. Democrats question whether the state would really save money by contracting out food and prison store services. There's opposition to closing Mound since many of the state's inmates come from the Detroit area and are better able to stay in touch with their families at Mound, bettering their chances for staying out of prison once they're released.

RETIREE INCOME TAXES

—Snyder: Originally proposed ending tax exemptions for most retirement income to raise about $900 million. Lawmakers balked at the plan amid complaints from retirees. Snyder's revised plan calls for raising about $300 million through retiree income tax changes. Those 67 and older as of Jan. 1, 2012 would continue to get the same tax breaks they get now, while the taxes would apply to only some retirement income of those aged 60 to 66. Income from Social Security and military pensions would remain exempt.

—Senate and House: Republican lawmakers have reacted more favorably to the revised plan, which came after lengthy negotiations with the Snyder administration. But GOP leaders in the House and Senate haven't promised there are enough Republican votes to pass it. Democrats generally oppose taxing retirement income.

—Opposition: Some retirees, particularly younger ones, still object to losing the most generous senior tax breaks in the nation, even though Michigan will still have the eighth most generous tax breaks. AARP Michigan objects to treating retirement differently depending on someone's age.

BUSINESS TAXES

—Snyder: Proposes replacing the complex Michigan Business Tax with a 6 percent income tax applied to corporations with shareholders. Many tax exemptions would be eliminated or phased out. His plan overall would reduce taxes on businesses by roughly $1 billion next fiscal year and $1.7 billion the following year. A scheduled rollback of the state's personal income tax rate from its current 4.35 percent to 4.25 percent would be delayed. All individual income tax changes would raise an extra $571.5 million next fiscal year and significantly more than that the following year. The state's Earned Income Tax Credit for low-income workers would be eliminated, taking away an average credit of more than $400 per family.

—House and Senate: Many lawmakers are sifting through recent changes made to Snyder's plan. No clear alternative appears to be gaining much traction among Republicans. They generally want to reduce the business tax burden, saying it would lead to more investment by companies and jobs for Michigan workers. But some are hesitant about income tax provisions that could be seen as tax increases. One potential change that has emerged in a House committee could offset a portion of the lost EITC credit with a $25-per-child tax credit for low-income families, who also could benefit from a larger tax credit for rent and property taxes payments.

—Opposition: Democrats and social service agencies are upset about a tax shift that would put more burden on individual taxpayers, including low-income workers, to help pay for sweeping business tax cuts.

FILM INCENTIVES

—Snyder: Proposes a $25 million program for movie and film incentives. The state's current incentive program for filmmakers is not capped and offers some of the most generous tax credits in the nation, but critics say they come at too high a cost and that much of the money awarded does not remain in the state.

—Senate: Proposes capping film credits at $10 million.

—House: Proposes eliminating film incentive funding entirely.

—Opposition: The film industry is lobbying aggressively to keep the current system in place. They argue the industry is still developing in Michigan and needs the more generous credits to mature. Some argue the publicity Michigan receives from the movies made in the state are worth the cost of the program.

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